Musk: Micron Supplying Tesla with 'Large-Scale' Memory Chip Allocation on 'Very Reasonable' Terms

Amid a global shortage of memory chips and persistently high prices, Tesla (TSLA-US) CEO Elon Musk disclosed on Wednesday (22nd) during an earnings call that Micron (MU-US) has recently provided Tesla with a 'very large-scale' allocation of memory chips under 'very reasonable' terms, helping the electric vehicle giant secure a critical component.

The rapid global expansion of artificial intelligence (AI) infrastructure is driving a surge in demand for memory chips. This heightened demand has led to supply constraints, affecting other industries, pushing up memory prices, and exacerbating supply pressures across manufacturing sectors.

Looking ahead, Musk is planning to produce semiconductors in-house. He has launched the Terafab initiative, aiming to build an unprecedented scale of computing and memory chip production capacity. This project is being jointly driven by Tesla and SpaceX (SPCX-US), both led by Musk as CEO.

However, Tesla still relies on Micron for supply and lacks the procurement power of some larger customers. According to data compiled by Bloomberg, neither Tesla nor SpaceX currently ranks among Micron's top ten customers.

Tesla reported its Q2 earnings on Wednesday, with revenue rising 26% year-on-year to $28.24 billion, surpassing the market estimate of $25.71 billion. However, adjusted EPS of 33 cents fell short of analysts' expectations of 51 cents, causing the stock to drop 4% in after-hours trading.

Tesla's stock has been on a downward trend recently, falling 11% from July to the close on Wednesday and accumulating a 17% decline year-to-date. This movement mirrors that of SpaceX, which surged after its June debut but has since retreated over 40% from its peak valuation.

The possibility of a merger between Tesla and SpaceX has long been a topic of investor speculation. When asked about it on Wednesday, Musk responded, 'The overlap between the two companies is growing increasingly significant, especially with the Terafab project. That will be an extremely large-scale endeavor.'

Nonetheless, he emphasized, 'Of course, we can't discuss mergers or similar topics on an earnings call.'

Musk and other Tesla executives noted that Grok, the AI chatbot now integrated into Tesla vehicles, was developed by SpaceXAI, formerly known as xAI.

Additionally, Musk stated that Tesla's autonomous taxi, Cybercab, will leverage SpaceX's Starlink satellite network for connectivity. He also revealed that SpaceXAI is currently developing an AI model intended to serve as the 'manager' for the humanoid robot Optimus.